Your On-Demand App and Regulatory Compliance

Your On-Demand App and Regulatory Compliance

Developing an on-demand app is an exciting and rewarding venture that you can launch on a small budget, but you must be aware of several legal and regulatory issues to protect yourself and your end-users. This post explores several key legal and regulatory issues you should know about and how to handle them.

Incorporate

It’s always a good idea to limit your personal liability by incorporating your business to protect your personal assets so things like your home, car and bank accounts are not at risk – i.e. if you get sued, only your business assets could be seized in a judgment or settlement. No matter how small your on-demand app’s marketplace is at launch, it’s well worth the minor expense to form a corporate entity to protect yourself financially.

Confidentiality

Don’t share your ideas without protection. The most common way of ensuring confidentiality is to use an NDA (non-disclosure agreement) when dealing with any outside parties including your developers, contractors or any people or entities with whom you are sharing your ideas and trade-secrets. In app development, this usually becomes relevant when dealing with developers, creative teams and consultants.

Before you begin negotiations with these parties, ask them to sign an NDA and agree that they won’t disclose any sensitive information.

Are Your On-Demand Service Providers Employees?

Are your On-Demand Service Providers Employees or Contractors?The difference between the two can have a huge impact on Canadian income tax if service providers and the app owners think they are contractors and the Canada Revenue Agency (CRA) decides otherwise. Have a look at this post for a detailed discussion on how to address this issue.

Tax Liability

If monies earned from the provision of services within your on-demand marketplace are considered a taxable supply under the Excise Tax Act and respective provincial tax regimes, you need to take steps protect your sellers and yourself from potential tax liability by permitting the collection of excise taxes within your platform or advising your sellers how to collect those taxes outside of it. Make sure you seek related legal advice and if necessary insert the appropriate language into your end user licence agreements. Have a look at this post for a detailed discussion on how to address this issue.

Intellectual Property Ownership and Protection

Intellectual property includes all work that is created in the process of developing, marketing, and operating your on-demand application including the source code, designs, graphics, app name, app icon and any content uploaded by your users.

If you are outsourcing one or more of these processes during development, make sure your agreement contain provisions which stipulate that you own the ensuing work. With respect to content uploaded by your users, make sure your end user licence agreements stipulate that you have permission to use that IP and that they will not use your IP other than through your app as it is intended to be used.

Terms of Use – End User Licence Agreements

Any business which operates a mobile application (an “App”) must have an End-User License Agreement (“EULA”) to govern its relationship with the App’s end-users. EULAs can establish ownership rights, limit liability, stipulate payment terms and address a host of potential issues to the App operator’s benefit. Have look at this post for a more detailed discussion of this issue.

Privacy Policy

Public expectations and regulatory privacy expectations are increasing. The European Union’s General Data Protection Regulation (GDPR) is raising privacy expectations of companies worldwide. Indeed, several companies including Microsoft, intend to extend GDPR protections to their users globally. Google also just updated its privacy obligations for its applications offered through its online Google Play store. Finally, privacy advocates in Canada are now pointing to the GDPR as the example this country should follow. Have look at this post for a more detailed discussion of this issue.

Closing Remarks

Taking steps to learn about these major legal and regulatory issues is a good way to start protecting yourself as new operator in the on-demand space. Consult a lawyer that deals with these issues as well to ensure that you are covering your bases and protecting yourself.